Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

Fearful Stocks for Greedy Investors

A Fool peers in through Wall Street's out door.

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." -- Warren Buffett

Of all the Oracle of Omaha's orations, this one holds a special place in Foolish investors' hearts. When looking to bag a bargain, a panicked sell-off by jittery investors offers you a great chance to snap up stocks on the cheap.

In the short term, professional traders' pessimism can become a self-fulfilling prophecy. Desperate institutions lower their asking prices to get rid of a stock, prompting buyers' bid prices to fall in tandem, creating the very price decline that both sides feared in the first place -- until the selling stops.

Until it does, savvy investors can "get greedy," snapping up bargains from these fearful sellers. (Assuming they really are bargains.) In today's column, we'll see which stocks Wall Street's motivated sellers are most frantic to unload. Once we've compiled this shopping list of potential picks, we'll check them against the collective intelligence of Motley Fool CAPS.

Companies are selected from the "Institutional Ownership Down Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

"Last one out, please turn off the lights ..."With that line, Wall Street gave up on its dreams of deriving cheap, clean energy from the sun.

Reports of truly massive oversupply in the global silicon market did a number on the solar stocks last week, with prices alternately ... ahem ... flaring up or fading to sunspots (depending on which day you looked at 'em.) Professional investors seem to have lost their taste for the roller coaster, and began selling the industry in droves. It didn't help matters that oil prices have recently tumbled about 15% lower. Or did it?

Because it's just this volatility that's given us a chance to pick up one five-star castoff from Wall Street on the cheap. Its name?

Quicksilver ResourcesCAPS All-Star foolergo8888 introduced us to this one earlier in the year as an "Independent oil and gas company, which engaged in the development and production of natural gas, natural gas liquids and crude oil, through a combination of developmental drilling, exploitation and property acquisitions."

In April, fellow All-Star Trimalerus was "loving Oil & Gas stocks ... because they have been trampled down by the market and they should be the first stocks to grow when the world economy recovers. Oil Peak is a beautiful thing if you can use it you your advantage."

But All-Star tobyg74 would argue that you don't even need to wait for peak oil to profit from Quicksilver, saying: "oil, oil, oil. Everyone needs it. Hurricanes make the price go up. Won't be long now for this one." (Because hurricane season is already on the horizon.)

Of course, Quicksilver isn't really much of an oil company. Gas is more its thing. At last report, Quicksilver claimed to have 1,639 billion cubic feet of the stuff in its proven reserves (along with, yes, 2.9 million barrels of black gold).

Convert the oil into "gas" at the standard industry metric, and you're left with total reserves equivalent to 1,656 billion cubic feet. Of course, natural gas is priced not in terms of "cubic feet," but of the BTUs produced by burning these "cubic feet" -- roughly 1,030 BTUs per foot cubed -- and the spot price is about $3.22 per million BTUs. So, the value on these reserves works out to -- let's see ... 1,656 billion cubic feet times 1,030, divided by 1 million, times $3.22 -- about $5.5 billion.

Meanwhile, Quicksilver itself carries an enterprise value of just $4.3 billion -- a 22% discount to the value of its hydrocarbon assets. Sound good?

It did to me, too, until I compared Quicksilver to peer gas producer Chesapeake Energy(NYSE:CHK). You see, Chesapeake's 12 trillion cubic feet worth of equivalent reserves are "worth" $39.8 billion; yet the company is selling for only $24.8 billion -- a 38% discount. Meanwhile, the nat-gas company we looked at last month -- Sandridge Energy(NYSE:SD), sports a ratio of $7.1 billion in reserves to $4 billion in enterprise value -- a 44% discount.

Foolish takeawayAcross the oil and gas industry, companies are selling for prices far below the value of their assets. Now, maybe the discounts are so big and so plentiful that you can just buy any ol' gas company, sit back, and wait for the profit to roll in. But if just a little extra effort can help you find the biggest bargain, and the fattest profit ... why not make the effort?

Speaking of which, do you know an even better bargain than the two I've named above? Click on over to Motley Fool CAPS, and tell us about it.

Fool contributorRich Smithdoes not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 644 out of more than 135,000 members. The Fool has adisclosure policy.

Author

I like things that go "boom." Sonic or otherwise, that means I tend to gravitate towards defense and aerospace stocks. But to tell the truth, over the course of a dozen years writing for The Motley Fool, I have covered -- and continue to cover -- everything from retailers to consumer goods stocks, and from tech to banks to insurers as well. Follow me on Twitter or Facebook for the most important developments in defense & aerospace news, and other great stories besides.